Cache Logistics Trust

Cache Logistics Trust | Buy

Fair value: S$0.81

Aug 1 close: S$0.795

OCBC Investment Research, Aug 1

Cache Logistics Trust's (Cache) Q2 2018 results were within expectations. Gross revenue increased 7.7 per cent to S$30.0 million while NPI dipped 0.1 per cent year-on-year to S$21.6 million. Q2's results include a quarter's contribution from the nine Australian assets that were acquired earlier in February.

DPU from operations and capital fell 17.6 per cent y-o-y to 1.419 S cents or 23.3 per cent of our initial full-year forecast, mainly due to the 13.7 per cent larger unit base following last year's rights issue.

Rental reversions for leases renewed dipped during the quarter by 4 per cent y-o-y. Going forward, we expect the challenging environment within the industrial space to continue for most of the rest of the year, before seeing daylight towards the end.

We look forward to the industrial sector bottoming end-2018/early-2019 and believe that Cache is ready to participate on the upturn.

As at July 31's close, we see an opportunity to collect Cache units 2-3 quarters before clearer signs of operational improvement are seen. With the rising interest rate environment, our cost of equity increases from 8.3 per cent to 8.5 per cent. After adjustments, our fair value falls slightly from S$0.83 to S$0.81. We upgrade Cache from Hold to Buy.

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